DFC Intelligence: Cloud gaming could reach $ 13.5 billion in annual revenue in 5 years

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Cloud gaming is less than 1% of the gaming industry today, but gaming analyst firm DFC Intelligence estimates it will grow to over 5% of total revenue, or $ 13.5 billion, in five years.

The new report from DFC said that one of the new growth areas is interactive streaming of content from the cloud, which is starting to generate new revenue. These include new forms of interactive entertainment such as Massive Interactive Live Events (MILEs), such as Genvid Technologies’ Rival Peak.

Rival Peak was an interactive reality show starring a dozen AI characters who could be instructed by the audience to take different actions in a Survivor-like competition. Now Genvid is creating more MILEs based on other genres such as horror.

Gaming companies are also using cloud games to boost their latest gaming subscription services as they use the growing and highly profitable game-as-a-service (GAAS) model.

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But DFC said it believes cloud gaming is not about distributing traditional high-end games. It believes that the opportunity is more about creating new forms of revenue-generating games and interactive entertainment that can only exist through the use of cloud delivery.

DFC said major media companies like Facebook, Amazon, Google, Microsoft and Netflix are looking at interactive cloud content as extensions to their existing social networking, entertainment and streaming services.

The analyst firm also said that new concepts like metaverse and MILEs are expanding the definition of games and interactive content and are expected to drive the future of interactive cloud streaming. These new events are already generating significant revenue opportunities, primarily from virtual merchandise sales.

Cloud gaming and interactive streaming are closely linked to the concept of metaverse, expanding products and services beyond the traditional video game market. New types of products that expand the definition of games and interactivity are the key to growth.

Why the original plans did not succeed

Stages in the bedroom

Above: Stages in the bedroom

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Cloud distribution is a way of delivering games and other content by streaming it to players from cloud-based data centers instead of running the games on players’ own machines. The theory of cloud gaming is that the player does not require expensive hardware because the processing takes place in the cloud and only video streams run on the user’s machine.

Such cloud distribution has picked up speed for video content as on Netflix, but cloud-based services have had it
limited effect for delivery of games and interactive content. DFC believes that action-oriented games will never perform as well with cloud delivery due to latency limitations.

Still, the opportunity lies in cloud delivery of games and interactive content, including new types of products that take advantage of the unique opportunities that the cloud provides. However, it is expected to remain limited as a distribution method for traditional high-end video games.

DFC believes that the GAAS business model will drive the market, and the same will see video content of gameplay and user-generated content.

MILE is a meta-related concept that is a reality in today’s marketplace. A MILE is a single simulation with many users participating in the event, which often affects the action both individually and collectively and thus also affects the result. The content is a video or virtual space streamed from the cloud.

Individual products like Roblox and Fortnite have started hosting live events that can attract millions of users and generate significant revenue through sponsorships and merchandising opportunities.

And Facebook, which has changed its name to Meta, has done some testing of MILEs as part of its plans to become a large metaverse company.

The largest players include Amazon, Epic, Facebook / Meta, Genvid, Google, Microsoft, Netflix, Nvidia and Roblox. By 2026, advanced consumers owning consoles and PC hardware are likely to generate $ 9.9 billion of the total $ 13.5 billion in revenue for cloug games by 2026.

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